Dijsselbloem Wants Cash from Mortgage Recipients

THE HAGUE, 29/06/13 - Finance Minister Jeroen Dijsselbloem is embracing a proposal requiring a cash contribution from people who want to buy a house.

A commission headed by Herman Wijffels brought out recommendations on the future of the banking sector Friday. They consider among other things that mortgages should be no higher than 80 percent of the value of the home. Those who buy a home should first save up.

Dijsselbloem considers the advice of the Wijffels commission "sensible.” The minister pointed out Friday that in the Netherlands "overly high mortgages have been provided in recent years, also compared with other countries.”

The cabinet will respond officially and at length to the report published Friday after the summer recess. Dijsselbloem will then also put forward plans for the future of the nationalised financial institutions ABN Amro, ASR and SNS Reaal.

The Wijffels commission, officially the Commission on the Structure of Dutch Banks, was set up to make recommendations for a stronger and more stable banking sector. It urges reprivatisation of ABN Amro and SNS “when circumstances permit this.” It also says the bank tax introduced by the Netherlands is unwise.

The Wijffels commission urges the establishment of a National Mortgage Institute which can transfer mortgages from banks to institutional investors. This would relieve the banks’ balance sheets and ensure that their risk ratios looked better.

The commission considers that thee risk ratio of the banks ('leverage ratio') must be higher than 3 percent, the minimum requirement of the banking supervisory authorities in the Basle Committee. A percentage was not specified. Wijffels Has called on policy-makers to strengthen the banks’ capital buffers without this being at the expense of their lending.

Banks should also not wait until 2019 to comply with the Basle 4 requirements. At the moment when European supervision of the system banks begins, banks must comply with this directive, according to Wijffels.

The commission says that Dutch banks must remain in a position to finance companies’ international activities. It does not consider a split-up of the retail and investment banking activities necessary. But it does urge Dutch banks to organise in such a way that in case of emergency, system relevant activities can be split off quickly and easily.

Finally, alternative financing forms such as credit unions and ‘crowd financing’, the private placement financing market and smaller companies’ bonds, should be encouraged by regulation.